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Your Home is a Hedge Against Inflation

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The concern about inflation is the sustained upward movement in the overall price of goods and services while the purchasing value of money decreases.   Tangible assets like your home consistently become more valuable over time.   In inflationary periods, your home is a good investment and a hedge against inflation. Money in the bank loses purchasing power due to inflation and the interest you may be earning is almost always less than inflation. Home prices are going up but so is rent.   With mortgage rates near historic lows, the interest is, generally, less than the appreciation the property is enjoying.   Combine this with the leverage that occurs using borrowed funds to control an asset and your equity is most likely, growing at a faster rate than inflation. A 90% mortgage at 3.5% for 30-years on a $400,000 home that appreciates at 4% a year will have an estimated equity of $220,000 in seven years due to appreciation and amortization.   That is a 27.5% annual rate of return o

Why is the APR higher than the interest rate?

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Annual percentage rate is a calculation to accurately reflect the cost of the mortgage considering the note rate of interest, financing fees and charges based on the term of the mortgage. Annual percentage rate, APR, calculates the interest rate and loan fees over the life of the loan expressed as a rate.   A mortgage has a quoted interest rate plus a specified number of points which may be paid at closing or rolled into the loan, in some instances. For example, a $400,000 loan amount at 2.98% interest for 30-years with 0.7 points would have an annual percentage rate of 3.0349%.   While the mortgage rate is quoted at 2.98%, the borrower must additionally pay 0.7 points or slightly less than one percent of the amount borrowed as a fee to the lender in consideration of making the loan. This increases the yield to the lender on what they are earning by making this loan and is expressed as the annual percentage rate for the benefit of the buyer. Since the lender is required to incl

There's more to it than you might think

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There is more to selling a home than you might think.  Superficially, a person might think that it will sell itself currently because, nationally, homes for sale receive 3.6 offers and they sell within 18 days.  Any business student can probably list the four Ps of marketing: product, price, place, and promotion.  It may appear that there isn't much to selling a home: put a price on it; photograph it; put a sign in the yard; and, put it in MLS but, on closer scrutiny, there is a lot more that the best agents provide. Long before the home goes on the market, the agent will create a detailed value and pricing study based on similar homes in size, price, proximity, and condition.  An overpriced home will sit on the market longer than it should.  The longer it stays on the market, buyers, as well as other agents, begin to wonder if there is something wrong with it. The agent will develop a staging and declutter plan to make the house show at its best because first impressions m

Will Soft Inquiries Hurt Your Credit Score?

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Soft inquiries, sometimes known as a soft credit check or a soft credit pull, do not impact your credit scores because they are not attached to a specific application for credit.   They can occur when a credit card issuer or mortgage lender checks a person's credit for preapproval purposes. Examples of soft inquiries are when you check your own credit or one of your current creditors checks your credit.   If you are concerned about the negative impact on your score, specify to the lender that you want a "soft pull" to see if you qualify for preapproval. Soft inquiries may appear on your credit report but should not adversely affect your credit score. Consumers are entitled to one free copy from each major credit bureau, Experian, Equifax and TransUnion, once every twelve months available at AnnualCreditReport.com .   Hard inquiries occur when a borrower makes a new application for credit.   These will impact your credit score and will remain on your credit report

Paying Down Your Mortgage

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When the situation arises that you have a lump sum of cash to pay down your existing mortgage,  there may be different options available.   Pre-paying principal on a fixed-rate mortgage shortens the term of the mortgage but the payment stays the same. Conversely, recasting a mortgage with a lump-sum principal payment lowers the principal and interest payment but leaves the term intact with the same payoff date. The interest rate on the mortgage will stay the same regardless.   Prepaying principal can be done at any time but may not be applied until the next payment date.   Recasting cannot be done within the first 90-days of a mortgage. Pre-paying principal is like driving faster on a trip to a specific destination to get you there sooner.   Recasting/Re-amortization gets you to the destination at the same estimated time of arrival but using less fuel. Most loans allow you to pre-pay principal, but recasting is not allowed on FHA, VA, and GNMA.   If you have a conventional loan

An Easy Fix to Avoid a Flood in Your Home

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Do you remember if or when you have replaced your washing machine hoses?   Are they the original hoses and if so, how old is your washing machine?   It is recommended that washing machine supply hoses should be replaced every five to seven years.   Washing machines, like all appliances, are expected to work and when they don't, it's time to have them fixed or replaced.   However, there is a critical connection from the water supply that may even be older than your washing machine itself. Eventually, unless hoses are replaced, they will fail, which on the mild side could be slow leaks or burst entirely, and could cause a catastrophic flood in the home.   The failure could come from a number of causes including age, improperly installation, poor-quality materials or poor design. The hoses are generally under the same pressure as the other plumbing in the home.   Imagine having an open faucet running directly on your floor. Ask someone whose hose broke while they were asle

In Search of a Big Mortgage

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The Fannie Mae and Freddie Mac loan limits are adjusted annually to keep up with cost of living but with the appreciation experienced in many markets, it may not be enough. When the conforming loan limit is not enough, qualified buyers can turn to a jumbo loan. The maximum loan limit on conforming, conventional loans for 2022 is $625,000 for a single-family home but is increased up to $937,500 for designated high price areas.   The underwriting guidelines for conforming loans are consistent with regards to things like minimum down payment, private mortgage insurance, debt-to-income ratio, minimum credit score and cash reserves required. Jumbo loans are loans more than the FNMA maximum limits and are considered non-conforming loans.   This allows lenders to set their own requirements on maximum loan amount, minimum required credit score, maximum debt-to-income ratio, and minimum down payment. The rates paid on the jumbo loans may be the same as conforming loan rates.   It might so